BUSINESS leaders in the region gave a cautious welcome to yesterday's announcement by the Bank of England that interest rates would be kept at 4.75 per cent for the fourth month in succession.

The decision by the bank's monetary policy committee (MPC) was widely expected by the City amid further signs of a slowdown in the economy.

It followed a stream of weak economic data, as well as evidence suggesting five rate rises since last November had cooled the property boom.

Alan Hall, regional director of manufacturer's organisation the Engineering Employers Federation (EEF), said the Bank of England must be ready to cut rates next year if the economy began to slow.

The EEF's fourth-quarter business trends survey, published earlier this week, showed a sharp fall in confidence in response to a range of increasing costs and the strengthening dollar.

Mr Hall said: "While the bank can afford to stay its hand into next year, strong headwinds are now being generated by an increasingly turbulent world economy.

"With manufacturers already being buffeted by increased costs and a weak dollar, if the outlook worsens they will look to the bank for swift action to keep them off the rocks."

Experts believe rates could be raised once more early next year, but have warned it could be a close decision.